Is Corporate Tax Registration Mandatory in UAE?

When you’re setting up a business in the UAE, you’ll probably want to know if the Corporate Tax Registration Mandatory in UAE for your business or not. also you can’t expect to start operating without a legal presence. That means presenting the necessary paperwork to prove the legitimacy of your entity, which includes registering for Corporate Tax.

In this post, we’ll answer all the questions in detail and guide you through the process step by step.

Is Corporate Tax Registration Mandatory in UAE for Your Business?

There isn’t a definitive answer to that question about the corporate tax registration in Dubai, as several variables factor into the answer. It depends on the type of business you own, where you operate, and how much you make. To clarify, it is important to know which entities fall under Corporate Tax Registration Mandatory in UAE

Let’s see what entities are obligated to register for Corporate Tax.

Standard UAE Companies

Standard companies that operate in the UAE and make more than AED 1 million a year must register for the UAE Corporate Tax. Not only is this the only way for these businesses to prove their legal legitimacy, but it’s also the only way to establish a tax identity and get a Tax Registration Number UAE.

As you can probably tell, these are two crucial factors for any business to establish to avoid potential legal issues.

Foreign Businesses

At first glance, forcing a foreign business to apply for Corporate Tax might seem unfair. That doesn’t apply to all foreign businesses, though. Only the ones with a consistent, long-term presence in the UAE must register.

Who Is Exempted from UAE Corporate Tax?

Now that you understand who’s required to register for Corporate Tax, it’s time to cover who’s exempted.

Businesses Making Less Than the Necessary Standard

As previously mentioned, the Corporate Tax Registration Mandatory in UAE for businesses making more than AED 1 million are required to register for Corporate Tax. That means any businesses making AED 1 million or less are exempt from that tax.

You see, from the perspective of the UAE government, businesses making less than AED 1 million are small businesses. The exemption comes as a way to support these businesses and promote a healthy environment for their growth.

UAE Government/Government-Controlled Bodies

Yes, federal and local UAE government entities, along with their ministries, authorities, and departments, are exempt from Corporate Tax. However, that exemption only applies if these entities are engaging in non-commercial activities.

If a government has a business with a license from the Department of Economic Development, that business isn’t exempt from Corporate Tax. That’s why government entities need to keep separate financial records for their businesses.

Businesses Engaged in Natural Resource Extraction

Businesses that engage in the extraction of natural resources don’t need to register for Corporate Tax. However, these businesses are still under the Emirate-level corporate taxation.

What Are the Penalties if Corporate Tax Registration Mandatory is Ignored?

If you fail to register for Corporate Tax on time, you’ll be fined a hefty fee. However, that fee differs, depending on what part of the process you failed to do on time.

Failure to Register on Time

If you don’t register your business within the Corporate Tax registration deadline UAE, you’ll be fined AED 10,000. Yes, that applies even for businesses that aren’t liable to pay that tax yet.

Filing Your Tax Returns Late

If you submit your tax returns later than necessary, you’ll be looking at a fine that ranges between AED 500 and 20,000, depending on how late you are.

Inaccurate Financial Records

In order for the Corporate Tax to be accurate, you need to provide accurate financial records that meet FTA guidelines. If you don’t, you’ll be looking at a AED 20,000 penalty.

How Can Companies Know If Corporate Tax Registration Mandatory in UAE Applies to Them?

To know if Corporate Tax applies to your business, you just need to look at the requirements. For example, if you own an active business in the mainland of the UAE and your annual revenue exceeds AED 1 million, the Corporate Tax applies to you. If your annual income equals or is less than AED 1 million, the tax won’t apply.

If you own a free zone company, you’re still obligated to register, although you might qualify for the 0% Corporate Tax rate on Qualifying Income.

So, all you have to do is read the qualification requirements and identify if they apply to your business.

Read More: Discover the Requirements for Corporate Tax Registration in UAE

Is Corporate Tax Registration Mandatory in UAE for Free Zone Companies?

If you’re not familiar with the term, free zones are areas built in the UAE to attract foreign investors. These areas have different regulations from the mainland.

These include 100% tax ownership, tax exemptions, and simpler administrative procedures. Unfortunately, these special regulations prompt businesses that operate in free zones to think they’re exempt from Corporate Tax registration UAE.

Well, that’s not the case. Free zone companies must also register for Corporate Tax. That doesn’t necessarily mean they’ll be taxed for their income.

It means the government will review their status to ensure they meet the necessary requirements to enjoy the 0% Corporate Tax rate on Qualifying Income.

Steps Should Businesses Take to Comply With Corporate Tax Registration Mandatory in UAE

So, you’ve identified that your business needs to register for Corporate Tax. Contrary to what you might think, you don’t need to go to an office and present your paperwork face-to-face.

You can now finish the whole process online using the user-friendly EmaraTrax. Here’s what you need to do:

• Create an account on EmaraTax portal, ensuring you enter accurate company information.
• Fill out the registration form, entering your business’s type, details, and tax status. 
• Submit all the previously mentioned required documents.
• Review your information, submit your application, and wait for the confirmation of your registration.

Alsun Tax Experts Are Ready to Guide Your Business

As you can see, there’s a lot on the line with Corporate Tax registration. Needless to say, you need to do every step right, as one small error could cost you a lot of money.

Unfortunately, gathering the right papers for this tax isn’t as easy as registering. So, if you think the process is too complex, just ask for help.

That’s what Alsun Tax Agency in Dubai is for. With a qualified team of tax consultants, accounting professionals, and tax agent in UAE, we ensure you do every step right.

Conclusion

So, is Corporate Tax registration mandatory in UAE? Well, it depends on the type of business you run, its location, and how much you make. And if your business qualifies for it, you need to take the right steps to ensure a registration without penalties.

That’s where Alsun Tax Agency comes in, guiding you through every step of the way to ensure a seamless registration. So, reach out, tell us what you need, and we’ll help you out.